Comments on: Gerard Brody on regulatory costs and benefits http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/ Fearlessly dispensing political, legal and economic analysis (and some whimsy) since 2002 Thu, 24 May 2012 12:13:01 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Nicholas Gruen http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192682 Nicholas Gruen Wed, 10 Oct 2007 01:44:50 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192682 Like I was implying Patrick - we need chapter and verse here. There is simply no automatic mechanism by which requirements once introduced get relaxed. Indeed as I've shown before, in some ways the regulatory review system we've set up slows this down. Like I was implying Patrick – we need chapter and verse here. There is simply no automatic mechanism by which requirements once introduced get relaxed. Indeed as I’ve shown before, in some ways the regulatory review system we’ve set up slows this down.

]]> By: Andrew Reynolds http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192674 Andrew Reynolds Wed, 10 Oct 2007 00:58:11 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192674 Bill, I deal with this area fairly regularly - and my experience is very different to what you seem to believe. With any major problems he regulation do get ramped up, mostly to absurd heights - in the US the Sarbanes-Oxley regulations are a prime example. Far from dropping during the intervening period they either stay static or, more commonly, continue their upward climb, just more gradually. Whether the original problems were caused by the existing regulations is also typically not examined and the solution to any problem is immediately assessed as being yet more regulations. If you are in any doubt that the regulatory burden is increasing markedly you just need to look at the sheer weight of paper moving through Parliament and being churned out by the federal, state and local bureaucracies. Bill,
I deal with this area fairly regularly – and my experience is very different to what you seem to believe. With any major problems he regulation do get ramped up, mostly to absurd heights – in the US the Sarbanes-Oxley regulations are a prime example. Far from dropping during the intervening period they either stay static or, more commonly, continue their upward climb, just more gradually.
Whether the original problems were caused by the existing regulations is also typically not examined and the solution to any problem is immediately assessed as being yet more regulations.
If you are in any doubt that the regulatory burden is increasing markedly you just need to look at the sheer weight of paper moving through Parliament and being churned out by the federal, state and local bureaucracies.

]]> By: Patrick http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192382 Patrick Tue, 09 Oct 2007 05:21:59 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192382 I would have said investor protection rules, director's duties and auditing independance standards were all potential candidates, particularly in the US. I would be pretty surprised if there was any 'whittling away' of the debt/equity rules! At any rate I am not aware of it. I would have said investor protection rules, director’s duties and auditing independance standards were all potential candidates, particularly in the US.

I would be pretty surprised if there was any ‘whittling away’ of the debt/equity rules! At any rate I am not aware of it.

]]> By: Nicholas Gruen http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192366 Nicholas Gruen Tue, 09 Oct 2007 02:02:48 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192366 What protections on fund raising have been whittled away? What protections on fund raising have been whittled away?

]]> By: Bill Posters http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192243 Bill Posters Mon, 08 Oct 2007 21:54:16 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-192243 Nicholas, the law around corporate fundraising (equity and debt) springs to mind. Nicholas, the law around corporate fundraising (equity and debt) springs to mind.

]]> By: Tom N. http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-191784 Tom N. Mon, 08 Oct 2007 14:02:43 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-191784 STRAW ECONOMIC MEN While Gerard Brody makes some valid points, he also misconstrues a number of elements of the RIS process. For instance, the Victorian "appreciable burdens" and "significant burdens on business" tests is only a trigger for further analysis: they are not a criteria for approving or disapproving of a regulation. (At the Commonwealth level, the trigger involves a burden on not just business but also individuals or competition, so burdens on consumers are in fact relevant for triggering RISs.) In any case, it can be argued that there are good reasons for RIS triggers to focus on business costs, along the lines that governments face strong incentives to regulate as a visible response to media's social/environmental crisis-of-the-moment, without considering either the real need for regulation, its effectiveness or the compliance costs to business. Regarding Brody's assertion that "sensible and necessary discussion regarding the impact of regulation has been hijacked by a mantra that regulation is always 'red tape' and must be avoided at any cost", I think this is just polemical nonsense. Certainly, a careful reading (or even, for that matter, a quick scan) of the statements and guidelines promulgated by Australian governments and their regulatory review bodies reveals that these bodies recognise that there are many legitimate rationales for regulation, and their focus in relation to compliance costs is on minimising <i>unnecessary</i> compliance costs; not on minimising compliance costs per se, let alone on minimising regulation. STRAW ECONOMIC MEN

While Gerard Brody makes some valid points, he also misconstrues a number of elements of the RIS process. For instance, the Victorian “appreciable burdens” and “significant burdens on business” tests is only a trigger for further analysis: they are not a criteria for approving or disapproving of a regulation. (At the Commonwealth level, the trigger involves a burden on not just business but also individuals or competition, so burdens on consumers are in fact relevant for triggering RISs.) In any case, it can be argued that there are good reasons for RIS triggers to focus on business costs, along the lines that governments face strong incentives to regulate as a visible response to media’s social/environmental crisis-of-the-moment, without considering either the real need for regulation, its effectiveness or the compliance costs to business.

Regarding Brody’s assertion that “sensible and necessary discussion regarding the impact of regulation has been hijacked by a mantra that regulation is always ‘red tape’ and must be avoided at any cost”, I think this is just polemical nonsense. Certainly, a careful reading (or even, for that matter, a quick scan) of the statements and guidelines promulgated by Australian governments and their regulatory review bodies reveals that these bodies recognise that there are many legitimate rationales for regulation, and their focus in relation to compliance costs is on minimising unnecessary compliance costs; not on minimising compliance costs per se, let alone on minimising regulation.

]]> By: Nicholas Gruen http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-191747 Nicholas Gruen Mon, 08 Oct 2007 13:25:37 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-191747 Sounds plausible enough in princple Bill. But I can't think of any examples. Can you? Sounds plausible enough in princple Bill. But I can’t think of any examples. Can you?

]]> By: Bill Posters http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-191665 Bill Posters Mon, 08 Oct 2007 11:10:25 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-191665 Generally it takes a catastrophe to ratchet up the level of regulation/consumer protection. And then the protections are gradually whittled away over the years, until disaster strikes again. Generally it takes a catastrophe to ratchet up the level of regulation/consumer protection. And then the protections are gradually whittled away over the years, until disaster strikes again.

]]> By: Jonno http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-191643 Jonno Mon, 08 Oct 2007 10:41:12 +0000 http://clubtroppo.com.au/2007/10/08/regulatory-costs-and-benefits/#comment-191643 That's a good point - we public servants work under the regime that numbers rule everything and have to make up appropriate numbers as required. Reading actual RISs would be very informative if compellingly boring. I suspect the average quality is pretty low. My experience is limited to one policy field - an 80s set of regulations justified every regulation where possible with links to policy back up - not perfect but it was nice as a public servant trying to interpret them later on being able to read why they had been put there. The 90s revision was a step backwards (more due to internal lack of vision than anything else) and it was very hard to see any justification. By the time the RIS was written, the public servants were exhausted and it was a 'tick the box' approach. I wonder what can be done earlier in the process of policy development underlying the regulations - the RIS does add a gatekeeper role at the end but how can you support the whole process to improve it? That’s a good point – we public servants work under the regime that numbers rule everything and have to make up appropriate numbers as required. Reading actual RISs would be very informative if compellingly boring. I suspect the average quality is pretty low.

My experience is limited to one policy field – an 80s set of regulations justified every regulation where possible with links to policy back up – not perfect but it was nice as a public servant trying to interpret them later on being able to read why they had been put there. The 90s revision was a step backwards (more due to internal lack of vision than anything else) and it was very hard to see any justification. By the time the RIS was written, the public servants were exhausted and it was a ‘tick the box’ approach.

I wonder what can be done earlier in the process of policy development underlying the regulations – the RIS does add a gatekeeper role at the end but how can you support the whole process to improve it?

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